'GET ON WITH IT’: Economist says Fed changes need to come soon

Key Concepts

• Trumpomics: The economic policies associated with Donald Trump, characterized by tax cuts and deregulation.
• Supply-Side Economics: Economic theory advocating for reduced barriers to production, such as lower taxes and deregulation, to stimulate economic growth.
• Laffer Curve: A theoretical representation of the relationship between tax rates and tax revenue, suggesting that beyond a certain point, increasing tax rates can actually decrease revenue.
• Median Family Income: The income level that divides the income distribution into two equal groups; half of families earn more, and half earn less.
• Tyranny of Low Expectations: The tendency to underestimate potential economic growth and accept subpar performance as the norm.
• Price Rule (for the Federal Reserve): A monetary policy rule that targets a specific price level or inflation rate, rather than focusing on interest rates.

---

Economic Performance Under Trump & Critique of Economic Consensus

The discussion centers on the economic performance during the Trump administration, with Art Laffer and Steve Moore arguing that it significantly outperformed expectations and debunked the predictions of many economists, including Nobel laureates. A key point raised is that the median family income increased by $2400 in 2025, and the Brookings Institute estimates an additional $1400 tax cut per family, totaling nearly $4000 in increased income for the average worker. Moore emphasizes that Trump’s approval rating on the economy (44%) should be much higher (84%) given the strong economic indicators.

The speakers criticize the prevailing economic consensus, particularly the projections from the Congressional Budget Office (CBO) and the Federal Reserve, which predict growth rates of 1.8% and 1.7% respectively. They contrast this with their belief that a 3.5% growth rate is achievable, citing historical precedent (average growth of 3.5% over the 20th century) and arguing that such growth could eliminate the budget deficit within 20-30 years. Laffer states, “You don’t have 22 separate individual Nobel laureates there. You’ve got one person and they divided into 22 groups of that one person.” This highlights his contention that the economic profession lacks independent thought and relies on a single, flawed model.

The Laffer Curve & Supply-Side Economics Triumph

The conversation explicitly frames the economic success as a “triumph of the Laffer Curve and supply-side economics.” Laffer explains that the economic profession consistently fails to grasp the principles of supply-side economics, specifically the idea that reducing taxes and regulations can stimulate economic activity. He sarcastically notes, “Who ever heard of an economy being taxed into prosperity? It's stupid on the face of it.” He further criticizes the notion that taxing the productive to fund those who don’t work will increase employment.

Critique of Economic Modeling & the Federal Reserve

A significant portion of the discussion focuses on the perceived failures of economic modeling and the Federal Reserve. The speakers express frustration with the CBO’s unwillingness to reveal its models and the Federal Reserve’s low growth projections. Laffer calls for a change in monetary policy, advocating for a “price rule” instead of interest rate targeting. He suggests that current Federal Reserve Chairman Jerome Powell should resign and be replaced by Kevin Worsh, who would implement this new approach. He believes a price rule would lead to lower interest rates and increased economic growth, which in turn would lower inflation.

Real-World Examples & Anecdotal Evidence

Moore provides a personal anecdote about the poor condition of the Potomac River, comparing it to a “third world country like Bangladesh,” to illustrate a failure of governance. Trump’s criticism of Maryland Governor Wes Moore is also mentioned. The speakers also reference the repeated mispredictions made by Nobel laureates regarding the economic impact of Trump’s presidency, both during his first term and after his re-election. They point out that these economists predicted a stock market crash and runaway inflation, which did not materialize. Paul Krugman is specifically mentioned as a frequent critic who was proven wrong.

Focus on Wages, Employment & Poverty Reduction

While acknowledging the importance of deficit reduction, the speakers emphasize that the primary focus should be on improving the lives of average Americans. Moore states, “The dream in America is always to make the poor richer, not to make the rich poorer.” They highlight the importance of increasing median wages, employment, and eliminating poverty as key indicators of economic success.

Notable Quotes

• Art Laffer: “It takes a PhD in economics not to be able to understand the obvious.”
• Steve Moore: “I call it the tyranny of low expectations.”
• Art Laffer: “Who ever heard of an economy being taxed into prosperity? It's stupid on the face of it.”

Logical Connections

The conversation flows logically from an assessment of current economic conditions to a critique of the economic profession’s forecasting abilities. The discussion then delves into the theoretical underpinnings of supply-side economics and the Laffer Curve, explaining why the speakers believe the current economic success validates their long-held beliefs. Finally, the conversation shifts to specific policy recommendations, such as implementing a price rule at the Federal Reserve.

Conclusion

The core takeaway is a strong endorsement of Trump’s economic policies and a scathing critique of the economic establishment. Laffer and Moore argue that the current economic strength demonstrates the validity of supply-side economics and the Laffer Curve, while simultaneously highlighting the failures of traditional economic modeling and the low expectations that constrain economic policy. They advocate for a shift in monetary policy towards a price rule and a renewed focus on policies that promote economic growth, increase wages, and reduce poverty. They believe a more optimistic and growth-oriented approach is essential for unlocking the full potential of the American economy.